Sony and Warner Brothers Give Up $100 Million In Claims Against Bankrupt Digital Music Service

August 17, 2012
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Beyond Oblivion, a bankrupt digital music service with a messy history, is one step closer to emerging from bankruptcy protection after creditors Sony and Warner Music gave up rights to nearly $100 million in claims in a settlement with the failed company. The music company, backed by Rupert Murdoch, was expected by some to revolutionize digital music and compete with the likes of iTunes and Spotify. The service would have allowed users to download music without subscription fees or advertising, and would have paid record labels royalties each time a song was heard. However, even though many backers such as Sony, Warner Bros., and other entertainment companies were on board, hardware manufacturers pulled back. As a result, the company filed for protection under bankruptcy law in January — prior to launching — according to the Hollywood Reporter. Following a bidding war between Nassau Holdings and Gee Beyond Holdings, the latter won the right to buy Beyond Oblivion’s assets with a $4.2 million bid. However, Sony and Warner Bros. objected to the sale, claiming that despite the company’s dissolution prior to the launch, their contract with Beyond Oblivion was operative and valid, entitling them each to roughly $50 million, according to the news source. The music service argued that, under the contract, payments would only be due following the launch. The parties entered into negotiations after Warner Bros. and Sony threatened to sue for breach of contract. The settlement allows the two companies to recover up to 60 percent of the cash proceeds of the sale to GBH and 50 percent of the net proceeds of the GBH loan, according to the Reporter. This may equate to $1.5 to $2 million for each company.